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Graeme Wells has provided some information regarding the level of support for the forest industry, amounting to $777 million on his own calculations spanning a period of 12 years ( Beware of Politicians Bearing Gifts, HERE) ).

Assuming for the moment that his calculations are correct this equates to around $65 million a year to support an industry that provides an annualized return to Gross State product of around $1.4 billion.  This would appear to me to be a reasonably sound investment.

However, the fact of the matter is that the level of support is much lower than this.  Unfortunately, this academic from the School of Economics and Finance has flagrantly misrepresented the situation and his arithmetic in his own tables does not add up.

Graeme must be careful when quoting figures to ensure that he is comparing apples with apples.  A green tonne of wood is not a bone dry tonne of wood.  And wood arriving at one end of the mill is not the same as wood leaving it.

The export woodchip price is the price for a bone dry tonne.  Wood arriving at the mill is green.  A green tonne and a bone dry tonne are not the same.  So on this point Graeme is out by a factor of 2
Further, wood arriving at the mill will have a lower value than wood leaving the mill.  It is called value adding.  Graeme seems to have also missed this rather basic point.

With reference to his Table, the following would appear pertinent:

One-off Subsidies:

In Graeme’s original paper he quotes from a newspaper source, in which a figure of $9.05 million is quoted.  He provides no details as to why he then uses a figure of $96.3 million, but does refer to an upgrade of the East Tamar Highway.  Rather a long bow, Graeme.

Regional and Community Forest Agreements:

These agreements allowed for compensation to be paid for the removal of a resource in which investment had already been made.  The agreements provided for a Commonwealth payment of $110 million under the RFA (of which only $106.8 million was paid), and a further amount of $131.2 million for the TCFA.  The State contribution to the TCFA was $90 million.

However the amount going to “industry” ie the commercial sector, from both of these agreements was an amount of some $42 million under the Tasmanian Forest Industry Development Program, and $4 million provided to support country sawmillers.  The remaining expenditure was not provided to industry. 

Furthermore, over $30 million of this total went to purchase private forest for conservation purposes.  Hardly a subsidy to industry. 

And that does not even involve the debate as to the difference between compensation (payment for loss of resource) and subsidy (to ensure continuing access to resource).  This of itself would warrant the exclusion of this item in toto.

State Owned Operations:

Some sloppy arithmetic in your table, Graeme, $2 million in the red.  However, the major point to be made here is that the figures are based purely on assumptions relating to the levels of profitability that FT should be making, according to Graeme.  On this basis, any figure would do, based on whatever assumption suits the argument.  Arguing from a different set of assumptions, his figure of $96.5 million subsidy could be doubled, or equally be 0.  Not a good basis for determining defendable figures.

Managed Investment Schemes:

The benefit of these schemes was provided to investors, as distinct from industry.  Plantations were indeed promoted and planted under these schemes, but to argue that they are there by way of subsidy is a bit rich.

TOTALS

For the 2008-09 column, “91.1” should read “97.1”, but what’s another error by this stage.

TOTALS in table: A$766.6 million, Total quoted in the body of the document is $777 million.  Bracket creep perhaps?

Efforts being made by people such as Graeme to paint forestry in a bad economic light ignore the fact that this industry provides employment for over 6000 people directly, and a further 6000 indirectly. 

No suggestion is coming forward from this economist as to the effect the loss of this industry and these jobs would have, not only on Gross State Product (around $1.4 billion each year), but to the social and economic misery to individuals, families and businesses around the State. 

A quick calculation of all of these people on the dole at say $250 per week for a year totals $150 million, to do nothing, which is at least double the amount Graeme is complaining about for them to be usefully employed. 

And that does not include the loss to wealth generation, the effect on the State economy, the level of job skills in the workforce, the breakdown in social cohesion and the general misery that such a solution would impose.

I guarantee all your readers that it won’t be Graeme fronting these folk and telling them they no longer have a job.  OK for those in ivory towers to proselytize what is good for others.  So let me make this point Graeme, I don’t think you are earning your keep.

Shame upon you.